Correlation Between Porto Seguro and Dhler SA

Can any of the company-specific risk be diversified away by investing in both Porto Seguro and Dhler SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Porto Seguro and Dhler SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Porto Seguro SA and Dhler SA, you can compare the effects of market volatilities on Porto Seguro and Dhler SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Porto Seguro with a short position of Dhler SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porto Seguro and Dhler SA.

Diversification Opportunities for Porto Seguro and Dhler SA

-0.69

Correlation Coefficient

Porto Seguro  Dhler SA

Excellent diversification

The 3 months correlation between Porto and Dhler is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and Dhler SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhler SA and Porto Seguro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Porto Seguro SA are associated (or correlated) with Dhler SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhler SA has no effect on the direction of Porto Seguro i.e., Porto Seguro and Dhler SA go up and down completely randomly.

Pair Corralation between Porto Seguro and Dhler SA

Assuming the 90 days trading horizon Porto Seguro SA is expected to generate 0.9 times more return on investment than Dhler SA. However, Porto Seguro SA is 1.11 times less risky than Dhler SA. It trades about 0.08 of its potential returns per unit of risk. Dhler SA is currently generating about -0.05 per unit of risk. If you would invest  3,542  in Porto Seguro SA on September 23, 2024 and sell it today you would earn a total of  211.00  from holding Porto Seguro SA or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Porto Seguro SA  vs.  Dhler SA

Porto Seguro SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Porto Seguro SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Porto Seguro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dhler SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhler SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dhler SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Porto Seguro and Dhler SA

The main advantage of trading using opposite Porto Seguro and Dhler SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porto Seguro position performs unexpectedly, Dhler SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dhler SA will offset losses from the drop in Dhler SA's long position.

The idea behind Porto Seguro SA and Dhler SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.